Lampert’s new role doesn’t change Sears’s reality

AndriaCheng

NEW YORK (MarketWatch) — Sears Holdings Corp. is giving its Chairman and billionaire hedge fund investor Eddie Lampert an additional role as chief executive, but that may not change the reality of things for the retailer still struggling to recover lost demand.

Sears
SHLD, +0.43%
made the announcement late Monday after it said its current CEO Lou D’Ambrosio, only in his post for about two years, is leaving at the end of the company’s fiscal year on Feb. 2 because of family health matters. Lampert’s ESL Investments is the majority shareholder of the Hoffman Estates, Ill.-based company. He personally owns about a one-fifth stake in the company.

Sears traded down 5.6% to $40.50 even as the company’s fiscal fourth-quarter adjusted profit and holiday same-store sales turned out better than some analysts had expected.

Reuters

Edward S. Lampert.

“Giving him an additional title does not change that reality, and in our opinion, does not change the direction of the company,” said Credit Suisse analyst Gary Balter. “At the end of the day, there is only one person who makes the big decisions from the divisions to dispose of, the capital expenditures budget, stores to sell, etc., and that person is Mr. Lampert.”

The CEO change again marked a revolving door at the top helm since Lampert engineered the 2005 merger of Sears and Kmart. He will become the fifth CEO since 2005.

Analysts have credited D’Ambrosio, a former International Business Machines Corp. executive for 16 years and a former CEO at communications system firm Aviva, for helping to stabilize results and better engage in communication with the investment community.

“Lou had added value,” Balter said. “His departure is a loss to the corporation.”

He tapped Ron Boire, the former CEO of electronics gadgets chain Brookstone last year, to lead the merchandising and retail stores at both Sears and Kmart. That hiring has led to some promising store redesign tests and other merchandising initiatives, analysts said. With his technology background, D’Ambrosio also had helped to expand the company’s Shop Your Way reward program to boost both online and in-store sales. Sears: financial play or retail turnaround.

“Since Ron Boire is a bona fide retail pro, and has been there about a year now, and is actually beginning to show some results as President of the stores, the issue is whether Eddie will let him continue to make the continued changes necessary to revive these moribund brands,” said Craig Johnson at Customer Growth Partners.

Boire’s background at chains including Best Buy Co.
BBY, -1.72%
, Toys “R” Us and Brookstone have accounted for the improvements at Sears, whose strength has always been in hardlines especially major appliances, which are just now starting to come back, Johnson said.

He said it remains a challenge to fix the company’s apparel business, including Lands’ End. Revamping Kmart, a brand he described as “stuck in the 1970s,” may be an even bigger challenge, Johnson said.

Sears didn’t respond to a request seeking comment on whether Lampert plans to stay in the post permanently, or if Sears would eventually seek a new CEO, or where he plans to run the company from. Lampert last year reportedly bought an estate north of Miami and moved its Greenwich, Ct.-based hedge fund to Florida.

In another twist, Mike Mikan, a former member of Best Buy board who served as interim CEO at the struggling electronics chain last year, last week was appointed as president of Lampert’s ESL.

While results at Sears Canada and the Kmart continued to slump, Sears U.S. showed a 0.5% same-store sales increase. ISI Group analyst Greg Melich said that marked the first increase at the Sears chain since the federal cash for appliance program in the first quarter of 2010.

Its loss is expected to be between $280 million and $360 million, or between $2.64 and $3.40 a share. Excluding an estimated non-cash charge of approximately $450 million related to pension settlements and $42 million of pension expense, Sears said profit would be between $132 million and $212 million, or between $1.25 and $2.00 a share, topping the $1.18 a share analysts expected in a FactSet poll.

It’s “not a great holiday, but (Sears) did make progress on the goals outlined,” said Melich. “The bottom line imperative for (Sears) is that it needs to stabilize traffic in the domestic operations if it will remain viable for the duration.”

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.